Question

A company's trial balance included the following account balances: Accounts payable $19,377 , Accounts receivable 81,506, Cash 73,494 ,Income tax payable 3,682 Inventories 25,986, Note payable, due in two years 1,879 ,Equipment 55,828 ,Stockholders' equity 204,508 ,Supplies 5,682 ,Wages payable 13,050. Required information What is the amount of the current ratio (round to two decimal places)? 1.00

A. 1.97
B. 5.17
C. 4.95

Answer 1

To calculate the current ratio, you divide the total current assets by the total current liabilities. In this case, the current ratio is B. 5.17.

Step-by-step explanation:

The current ratio is a financial ratio that measures a company's ability to cover its short-term liabilities with its short-term assets. It is calculated by dividing the total current assets by the total current liabilities.

In this case, the total current assets are the sum of cash, accounts receivable, inventories, and supplies, which is

$81,506 + $73,494 + $25,986 + $5,682 = $186,668.

The total current liabilities are the sum of accounts payable, income tax payable, and wages payable, which is

$19,377 + $3,682 + $13,050 = $36,109.

Therefore, the current ratio is $186,668 / $36,109 = 5.17. Therefore, the correct answer is B. 5.17.